The Supreme Court has held that the transfer of tenancy rights following the amalgamation of a bank under the Banking Regulation Act amounts to an assignment or parting with possession under Section 14(1)(b) of the Delhi Rent Control Act, 1958, if carried out without the landlord’s written consent.
The bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh restored an eviction decree against Punjab National Bank (PNB), holding that the statutory merger of Hindustan Commercial Bank (HCB) into PNB did not exempt the bank from compliance with the Rent Control Act.
The dispute arose from a tenancy created in 1947 when British Motor Car Company leased commercial premises to Hindustan Commercial Bank for non-residential use. In December 1986, the Central Government sanctioned a scheme under Section 45 of the Banking Regulation Act through which Hindustan Commercial Bank was amalgamated with Punjab National Bank. As a consequence, all assets, liabilities and tenancy rights of HCB vested in PNB.
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The landlord subsequently initiated eviction proceedings under Section 14(1)(b) of the Delhi Rent Control Act, alleging that HCB had assigned or parted with possession of the premises in favour of PNB without obtaining its written consent.
While the Additional Rent Controller dismissed the eviction petition, holding that the statutory scheme bound the landlord, the Additional Rent Control Tribunal reversed that decision and ordered eviction. The Delhi High Court later restored the dismissal of the eviction petition, holding that the merger was involuntary and therefore did not amount to subletting or assignment. The landlord challenged that decision before the Supreme Court.
The principal issue before the Supreme Court was whether a transfer of tenancy rights resulting from a statutory amalgamation under Section 45 of the Banking Regulation Act constitutes “subletting, assignment or otherwise parting with possession” under Section 14(1)(b) of the Delhi Rent Control Act.
The landlord argued that the provision makes no distinction between voluntary and involuntary transfers. Since HCB ceased to exist and PNB became the occupant of the premises without the landlord’s written consent, the statutory ingredients for eviction stood satisfied.
On the other hand, PNB contended that the merger was effected under a statutory scheme framed by the Reserve Bank of India and sanctioned by the Central Government, making the transfer involuntary and outside the scope of Section 14(1)(b).
The Court examined the language of Section 14(1)(b) and held that the provision requires only two conditions: the tenant must have sublet, assigned or otherwise parted with possession of the premises; and such transfer must have taken place without the landlord’s written consent.
The Bench emphasised that the statute does not distinguish between voluntary and involuntary transfers. Referring to its earlier decisions in Parasram Harnand Rao, Singer India Ltd., General Radio & Appliances and other precedents, the Court reiterated that the reason behind the transfer is legally irrelevant once possession and tenancy rights have passed to another entity.
According to the Court, once HCB ceased to exist after amalgamation and PNB acquired the tenancy rights and possession of the premises without obtaining the landlord’s consent, the requirements of Section 14(1)(b) stood fully satisfied.
The Court also rejected the argument that the amalgamation scheme under Section 45 of the Banking Regulation Act overrides the Delhi Rent Control Act because it is statutory in nature.
Relying on its earlier decision in K.I. Shephard v. Union of India, the Bench held that schemes framed under Section 45 of the Banking Regulation Act are administrative rather than legislative. Consequently, such schemes cannot override or dilute the operation of the Delhi Rent Control Act or create an exception to the requirement of obtaining the landlord’s written consent before transferring tenancy rights.
The Court further clarified that decisions concerning statutory vesting under the Esso (Acquisition of Undertakings in India) Act, 1974 and mergers under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 were distinguishable because those enactments operate differently from Section 45 of the Banking Regulation Act.
The Supreme Court found that the Delhi High Court had wrongly relied on an earlier decision dealing with a different statutory framework. It held that the High Court erred in treating the merger as immune from the operation of Section 14(1)(b) merely because it occurred under a banking amalgamation scheme.
Accordingly, the Court restored the eviction decree passed by the Additional Rent Control Tribunal.
Considering that the bank had remained in occupation of the premises for several decades, the Supreme Court granted Punjab National Bank time until 31 January 2027 to hand over peaceful and vacant possession of the premises to the landlord. The bank has been directed to file an undertaking before the Supreme Court within four weeks and continue paying contractual rent until possession is delivered. Failure to comply would entitle the landlord to recover possession in accordance with law.
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